The Phenomena Of Third-Party Contracts

Manchester United announced a befuddling move in August 2010 when it purchased the contract of Bébé, an obscure Portuguese forward, for an estimated €9 million from Vitória de Guimarães of the Primeira Liga.

Then 20 years old, Bébé had been pulled from such a depth of obscurity that PSV Eindhoven, a club offered his services on a free, were not even vaguely familiar with him.

It was only after Bébé’s signing with Manchester United that his profile began to surface in media reports. Born in the Lisbon suburb of Agualva-Cacém to Cape Verdean immigrants, he was abandoned while a young child and cared for by his grandmother who lived in a rough area of the capital district. At age 12, a court determined Bébé at risk of falling into gang activity and ordered him to a church-administered youth home. It was at this residence of several dozen young men that he learned to read, write, and play the sport that freed him from poverty.

While Bébé’s escape from such poor conditions has made for a heartwarming story, it was the way he emerged to the English Premier League that has caused head-scratching amongst football insiders. Bébé, needless to say, could not travel the usual path of football’s multimillionaires through club youth programs; reports have said, in fact, that he did not play organized football until the age of 16 when he was recommended to Loures, an amateur club based near the Lisbon youth center. Even when age 19, he was playing in the European Street Football Festival, a program geared to the underprivileged.

His raw talent, however, seems to have been apparent. Third-tier Estrela da Amadora was first to give him a professional salary before the club faced budget problems. A vital physical presence for the side, Bébé ( main image) was the last Estrela player to receive a paycheck before all salaries were cut off during the club’s financial meltdown. He walked away from the team with five matches left in the 2009-10 season and moved on a free to Vitória de Guimarães that summer.

Bébé, as it turned out, would never play in a single game for the Primeira Liga club. Only two months after signing with Vitória, Manchester United held a press conference at Old Trafford where Bébé sat next to established internationals Javier Hernandez and Chris Smalling as one of the club’s new signings. He also posed for photographs with Sir Alex Ferguson, who acknowledged that he’d signed him on advice from former assistant Carlos Queiroz and had never met him or seen him play.

Since then, Bébé has spent most of his time with the United reserves squad and has looked out of his depth in the few first-team looks he has been given. Although he has scored goals in friendlies and the League Cup, Bébé seems incapable of meeting the demands of Premier League football and will again be loaned out, this time to Rio Ave. Under Ferguson’s two and a half decades of leadership, Manchester United have made off-the-mark signings before. But the outlandishness of United’s Bébé signing seems totally out of character for the club and asks for a look into the politics surrounding it.

Investors Taking a Gamble

Bébé, like many players from continental Europe, Latin America, and Africa, is a product of third-party ownership in which outside investors hold a player’s economic rights. While the practice is banned in England, it is a routine form of business in other parts of the world where clubs are more financially strapped by inflation and rising costs. A club’s prized players have been obtained in many situations through third-party arrangements; Atlético Madrid striker Falcao and Santos forward Neymar are two recent examples of players who took on key roles through this type of bargaining. Frowned upon in English football, it is taken as part and parcel in the leagues of other countries.

Third-party ownership is essentially a craps shot taken by wealthy businessmen, some of whom represent dozens of players amongst several clubs. Behind-the-scenes figures such as Kia Joorabchian, a British-educated Iranian connected to some 70 players, and Jorge Mendes, the Portuguese agent behind the recent Bébé signing, will arrange groups whom finance a player’s expenses under condition that they share his rights with the club. Based on the player’s performance and demand in the market, the club is given an option to buy out the third party’s share of his contract or sell him elsewhere while the investors take their percentage of the transfer fee. Clubs using this arrangement thus shift some of their financial burden to outsiders while risking loss of the player and some loss of profit if he reaches expectation.

Clubs have succeeded on the international level while using third-party arrangements. A shining example is FC Porto of the Primeira Liga, who have kept pace with richer clubs to win the Champions League and Europa League. Supporters of the third-party system have made an argument that clubs with Porto’s limited finances would have no chance of competing on the higher levels of football if they could not relieve themselves of at least some financial weight. Many, however, do not see a level playing field and have objected to the ways in which third-party ownership is conducted.

Third-party arrangements are considered a threat to the stability of football in some circles, mainly due to their lack of transparency. While there is a general idea of how third-party contracts operate, clubs have been mum on the finer workings of their agreements to the public. Strange practices, more often than not, seem to be at work; players such as Bébé and Zenit striker Hulk have made stopoffs at a club before moving to another – for more money – without ever playing a match. At other times, players such as Carlos Tévez have refused to play and asked for a transfer. The amounts paid, and to whom, are often rough estimates and never truly made clear.

It’s a lingering question of how beholden the club is to investors when they own a share of the player’s value. How much of a say do these businessmen have in the daily operations of a club when a player is bound to them? And what might develop on the pitch if two players represented by the same investors face each other as opponents?

Controversy in England

The disorder that could result in England from third parties became known when the Carlos Tévez-Javier Mascherano debacle happened in the 2006-07 season. The two Argentines were signed by West Ham United from Cortinthians of the Brazilian Série A in August 2006. It was later found that the players were vested by agencies belonging to Kia Joorabchian and his colleague Pini Zahavi and acquired by West Ham in a third-party agreement. By that time, English clubs were required to buy out all third-party interests when signing a player. West Ham had a clear financial advantage over its competition in having Joorabchian’s group foot a portion of the costs.

It was an advantage that translated into West Ham’s last-minute survival in the Premier League. On 13 May, Tévez scored in a 1-0 win over Manchester United. The match, West Ham’s last of the season, vaulted them out of relegation. Sheffield United, who were sent down on goal differential, sued West Ham and reached an agreement of £18.1 million in compensation for violating the third-party ban. The FA itself fined West Ham £5.5 million, an all-time record, for the ban violation and filing improper contract documents.

Tévez has since gone to Manchester United and most recently Manchester City, where a soap opera between the Argentine and manager Roberto Mancini dragged on for weeks last season. Tévez drew criticism from throughout the football community when he refused to warm up during a Champions League match against Bayern Munich. After he was suspended by the club and ordered to play for the reserves, Tévez walked out and an embarrassing public spat developed between Joorabchian and Mancini over the manager’s handling of the situation. Tévez returned in the season’s closing weeks after being shopped around to other clubs and helped City to win their first Premier League title since the late 1960s.

Other clubs, such as Queens Park Rangers and Luton Town, have faced fines and, in some cases, point deductions when it was discovered that a third-party-owned player was on their roster. The Football League was first to introduce Rule 48 on third-party investment before the FA created its Third Party Investment in Players Regulations after the West Ham incident. But agents and matchmakers continue to operate behind the scenes, often without licensing. English clubs have also been adversely affected by the third-party ban when trying to obtain foreign players, such as when Chelsea, who were part of the Hulk sweepstakes, and Tottenham Hotspur were unable to close on signings.

The Rights of Players

Besides the impact on organizations, the effect on individual players living in the network might be worth studying. Many come from poor backgrounds and earn salaries they may otherwise never have seen, but third-party opponents believe it can crush a player’s freedom and independence. If a brokerage wants to capitalize on a player’s market value and decides that he should move from his current club to one in another region or country – perhaps uprooting his family – it is not clear if he is given the right to object when he doesn’t control his own economic rights.

Figures in the sport have likened these arrangements to slavery or, at least, indenture servitude in which agents are reaping most of the profits and sucking money out of football. Former Arsenal CEO David Dein commented in 2009 that “the practice is enslaving players, particularly those from South America and Africa.” He added that “third-party ownership removes money from the game. If a club buys a player from another club, the money circulates within the game and works its way down the system. With third-party ownership, the sale of a player benefits individuals and [outside] companies. And when money goes out of the game, it inhibits the progress of clubs and their ability to invest in players, facilities, and stadiums.”

UEFA’s governing board has agreed and recently called for FIFA to eliminate third-party representation worldwide. At its December meeting in Lausanne, UEFA general secretary Gianni Infantino said, “We all know that third-party ownership of players bears many threats and there are many issues linked in terms of the integrity of competitions, financial fair play regulations, and so on. It is really time to regulate it and to have a firm stance; however, in a reasonable way, with a transitional period to enable clubs to cope.” UEFA held earlier discussions on third-party ownership that have amounted to little but may be forced to act while under scrutiny for its Financial Fair Play guidelines. UEFA intends to set its own regulations if FIFA does not act soon enough.

Although third-party ownership may enter legal extinction in Europe, its supporters will make sure that it does not go quietly. Kia Joorabchian himself summarized its assumed advantages when speaking to the Daily Mail in 2007 about the West Ham controversy: “[These agreements] are a way of bringing outstanding players to clubs that would not be able to afford them ordinarily. So they increase the competition. Why should only Manchester United and Chelsea be able to afford the best players?”

“What happens, in Brazil particularly, clubs cannot afford to buy a player. So they go to a business, a bank, a major supermarket, an individual, a person, a wealthy individual, and say: ‘We want Mr. X. You put up 70, 80, 100 percent of the money, let him play here.’”

“It is a little bit like a loan deal between two clubs, except it is a loan deal between the club and a third-party.”

It is not certain if a ban will actually end the practice. Businessmen have always excelled at changing name and shape, so it is likely that third-party representation will take on another form. For the time being, third parties continue to flourish in most of the football industry.